Business

AdvantagesVariable costing provides a better understanding of the effect of fixed costs on the net profits because total fixed cost for the period is shown on the income statement. Various methods of controlling costs such as standard costing system and flexible budgets have close relation with the variable costing system. Understanding variable costing system makes the use of those methods easy. Companies using variable costing system prepare income statement in contribution margin format that provides necessary information for cost volume profit (CVP) analysis. This data cannot be directly obtained from a traditional income statement prepared under absorption costing system. The net operating income figure produced by variable costing is usually close to the flow of cash. It is useful for businesses with a problem of cash flows. Under absorption costing system, income of different periods changes with the change of inventory levels. Sometime income and sales move in opposite directions. But it does not happen under variable costing. Disadvantages

Financial statements prepared under variable costing method do not conform to generally accepted accounting principles (GAAP). The auditors may refuse to accept them. Tax laws of various countries require the use of absorption costing. Variable costing does not assign fixed cost to units of products. So the production costs cannot be truly matched with revenues. Absorption costing is usually the base for evaluating top executive’s efficiency. Advantages:

To understand more the effect of the fixed cost in the net profit which shown on the income statement Using methods easily such as: standard costing system and flexible budget which helps to know more how to use variable costing system. Valuable for the companies to deal with cash flows system

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Student number: 100231152
Module code: 5AG501
Module Leader: Tapiwa Gande
Business Accounting
The systematic reporting and analysis of fanatical transactions of the business. The person in charge of accounting is known as an accountant, and this individual is typically required to follow a set of rules and regulations, such as the Generally Accepted Accounting Principles. Accounting allows a company to analyse the financial performance of the business, and look at statistics such as net profit.
In other words accounting is one of the important parts of business, which can significantly improve structure of business. For example if business is getting loose not profit it can show where business needs to save money and where business need to push money, to make more efficient work and gain profit.
Why is accounting important for business?
There are lots of reasons why accounting is important, there for accountings is a language that needs to be understood clearly by people, but more important by business owner, and especially by accountant`s. If the figures which are given in forms accountant can not see by clear picture and can not tell what is going wrong or what is going good, than business needs to employ another accountant for that organization, who actually will see clear...

...Business entity concept
This concept assumes that, for accounting purposes, the business enterprise and its owners are two separate independent entities. Thus, the business and personal transactions of its owner are separate. For example, when the owner invests money in the business, it is recorded as liability of the business to the owner. Similarly, when the owner takes away from the business cash/goods for his/her personal use, it is not treated as business expense. Thus, the accounting records are made in the books of accounts from the point of view of the business unit and not the person owning the business. This concept is the very basis of accounting. Let us take an example. Suppose Mr. Sahoo started business investing Rs100000. He purchased goods for Rs40000, Furniture for Rs20000 and plant and machinery of Rs30000. Rs10000 remains in hand. These are the assets of the business and not of the owner. According to the business entity concept Rs100000 will be treated by business as capital i.e. a liability of business towards the owner of the business. Now suppose, he takes away Rs5000 cash or goods worth Rs5000 for his domestic purposes. This withdrawal of cash/goods by the owner from the business is his private expense and not an expense of the...

...+21,978
21,978
=
2.37:1
Average Inventory
Turnover
395,683
78,271,+86,1572
=
4.8 times/yr.
Average Collection
Period
289,484
25,952
=
11.15 times/yr
365
11.15
=
32.7 days
Average Payable
Period
403,569
54,258
=
7.44 times/yr.
365
7.44
=
49 days
Net Sales to
Net Assets
689,247
280,843
=
2.45:1
Net Sales to
Working Capital
689,247
129,936-87,622
=
16.29:1
Net Profit on
Sales
30,189
689,247
=
4%
Net Profit to
Equity
30,189
73,375
=
41%
Q2. Do you see any ratios that, on the surface, look suspicious? Explain
A2.if we go to Robert Morris Associates Annual statement studies or Dun and Bradstreet’s Key Business ratios and compare the 12 ratios calculated for Eden's Garden against businesses within this industry of a similar size (if we look under Nursery, and Lawn and Garden Supplies). Answers will vary depending on the year or edition used.
Interpreting Business Ratios-- Ratios are useful yardsticks when measuring a small firm's performance and can point out potential problems before they develop into a crisis.
A. Comparison of a firm's ratios to businesses within the same industry is a useful tool. Afirm can also develop ratios unique to its operation. Several organizations compile and publish operating statistics including key ratios. This information may be found in the following sources:
1. Robert Morris Associates
2. Dun & Bradstreet, Inc.
3. Vest Pocket Guide to Financial Ratios
4. Industry Spotlight
5....

...Areas of Business
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Weston’s Place will be a family oriented restaurant located at 212 Main Street Wendell, North Carolina. A financial plan is “a vital tool to help an entrepreneur manage their business more effectively, steering their way around the pitfalls that causes failures”, (Scarborough & Zimmerer, 2012, page 194). The financial plan section is the section in the business plan that determines whether or not the business idea is feasible. The financial plan consists of three financial statements, the income statement, the cash flow projection, and the balance sheet, with a brief explanation of the statements. Income statement is “a financial document that shows how much money (revenue) came in and how much money (expense) was paid out”, (Pinson & Jinnett, 2006). Pinson & Jinnet (2006) stated, “cash flow statement is the actual movement of cash within a business; the analysis of how much cash is needed and when that money is required by a business within a period of time”. According to Pinson and Jinnett, “a balance sheet is an itemized statement that lists the total assets and liabilities of a given business to portray its net worth at a given moment in time”.
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Weston’s Place
1. REVENUE
2. Gross Sales
3. Net Sales
4. Cost of Sales
5. Operating Expenses
6. General/Administrative
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...0 EXECUTIVE SUMMARY
This business plan is prepared to obtain financing in the amount of $10,000 to complete the service development, set up operations base, and implement an aggressive sales and marketing program.
The Hair Salon is a proposed new business. Principal has developed the skills and knowledge to manage and provide hair salon services for Fort Frances, and the surrounding area. The total market potential for the first year is $1,746,675. The business will be profitable in the first year of operation and conservatively expects to achieve sales of $53,392 with a net income of $12,352 by the end of the first year.
The market for this new business will be Tribal First Nation where the business will be located, Rainy River and Nicickousemenecaning First Nations, Fort Frances, Alberton and La Vallee Townships, Emo and the surrounding area. The market research has revealed a lack of hair salon services located within Tribal First Nation.
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